Tata Steel demands suppliers cut prices by 30%

Tata Steel told suppliers that they risk losing business if they don’t cut prices. 

Tata’s Long Products division, which supplies plates, sections, wire rod and other products, wrote a letter to suppliers demanding a 30% long-term slash in prices, in addition to an “immediate” price reduction of 10% on all purchases.

Tata said that its Longs Steel business is in a “difficult business situation” because of market conditions. The Indian company wants the business to turnaround but it needs support from its suppliers.

“We are seeking a long-term price reduction of 30 percent … on all purchases. As a first step we would appreciate an immediate price reduction of 10 percent,” the letter said, according to the Sunday Telegraph.

It went on to say: “Should you – for any reason – be unable to support us in our efforts, we will need to fully consider other options.”

Neil Smith from recruitment business Kinetic, was one of the recipients. He told the BBC in an interview that he’d never seen something like this. He was quoted by the BBC as saying: ”You don’t have valued suppliers offering valued services and then turn around and say take a 30% cut. That goes against any business maxim on the planet,”

A spokesman for Tata Steel said:

“Our stated strategy stays unchanged. Long products will not have a future within Tata Steel.

“And that means we will come to one of the possible options which I don’t need to spell out and decisions about that have to happen within the timeframe of this fiscal year, to say the very least.”

Tata is reportedly considering offloading its UK business

The company has already made three restructuring announcements of its UK business since the summer.

“In response to the above market and business conditions in the UK, the company continues to restructure its UK business and has recently announced the closure of some of the sites in the UK,” the firm said.

Last week Tata Steel Europe Chief Executive Karl Koehler said:

“Our Long Products unit has been in dialogue with suppliers for a month. Initially some were spoken to directly, others were contacted by letter to begin a consultation process.

“We have had an excellent response with positive and innovative ways we can work together.
“The current position in UK steel is no secret and has been explained in all communications with all partners.”